TDSAT Allows MIAL Appeal, Sets Aside Key Parts of AERA's Fourth Control Period Tariff Order for Mumbai Airport

TDSAT has allowed Mumbai International Airport's appeal against AERA's aeronautical tariff order for Chhatrapati Shivaji Maharaj International Airport, directing AERA to revise its determinations across nineteen regulatory issues within three months.

The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) has allowed an appeal filed by Mumbai International Airport Limited (MIAL), the operator of Chhatrapati Shivaji Maharaj International Airport (CSMIA), against Order No. 01/2025-26 dated 7 May 2025 passed by the Airports Economic Regulatory Authority of India (AERA). That order had determined the aeronautical tariff for CSMIA for the Fourth Control Period running from 1 April 2024 to 31 March 2029. The Tribunal, constituted by Justice D.N. Patel (Chairperson) and Dr. Sanjeev Banzal (Member), reserved the matter on 10 March 2026 and pronounced judgment on 29 May 2026. Across nineteen framed issues, the Tribunal found that AERA had departed from its own statutory mandate and from binding precedents of this Tribunal, and directed AERA to give effect to the judgment within three months of receiving a copy.

The Dispute Before the Tribunal

MIAL preferred the appeal under Section 18(2) of the Airports Economic Regulatory Authority of India Act, 2008. The challenge was directed at AERA's methodology in computing the Aggregate Revenue Requirement (ARR) for the Fourth Control Period. The contested determinations spanned capital expenditure treatment, cost of debt and equity, allocation of costs between aeronautical and non-aeronautical activities, the computation of the “S” factor under the Target Revenue formula, and several specific items including digitalization costs, bad debts, legal expenses, and soft costs.

MIAL's case, argued by Senior Advocate Mr. Sajan Poovayya, was that AERA had violated settled principles laid down by this Tribunal in multiple earlier AERA appeals, had applied normative benchmarks it had no statutory authority to impose, had capped the cost of debt and equity below actual levels, and had acted inconsistently by treating MIAL differently from Delhi International Airport Limited (DIAL) despite both airports being governed by similar concession agreements — the Operation, Management and Development Agreement (OMDA) and the State Support Agreement (SSA).

AERA, represented by Mr. Ritesh Kumar, defended the impugned order as a lawful exercise of its regulatory mandate under Section 13 of the AERA Act, asserting that it was empowered to assess the prudence and efficiency of expenditure and to cap costs that exceeded efficient market levels. The Federation of Indian Airlines (FIA), the second respondent represented by Senior Advocate Mr. Buddy Ranganadhan, adopted AERA's arguments and additionally contended that bad debts should be addressed through enhanced working capital rather than as an O&M expense.

Nineteen Issues: Settled and Fresh

The Tribunal framed nineteen specific issues. Of these, MIAL submitted that thirteen were already covered by binding decisions of this Tribunal. Eight issues were said to be settled by the MIAL Second and Third Control Period judgment dated 6 October 2023 in AERA Appeal Nos. 9 of 2016 and 2 of 2021, and by the GHIAL Third Control Period judgment dated 14 February 2024 in AERA Appeal No. 4 of 2021. These included the cost of debt for the Third Control Period, the classification of the General Aviation Terminal, the HRAB adjustment for demolition of Terminal T-1, the 1% penalty on unincurred capex, the inclusion of Annual Fee and Other Income in the S factor, revenue from existing assets, and the treatment of the S factor in aeronautical revenue for computing aeronautical taxes.

Five further issues were said to be settled by the Tribunal's judgment dated 11 September 2025 in AERA Appeal No. 1 of 2023 and connected appeals, and in AERA Appeal No. 1 of 2024 in the matter of GMR Goa International Airport. These covered corporate cost allocation, soft costs for the Fourth Control Period, non-aeronautical revenue, cost of equity, and cost of debt for the Fourth Control Period.

The four issues requiring fresh adjudication were: the adjustment to target revenue based on a Self-Contained Note from an Authorised Investigation Agency; bad debts; the aeronautical allocation of digitalization costs; and legal expenses for the Fourth Control Period.

Normative Capex Benchmarks: No Statutory Authority

On the first issue, the Tribunal reiterated that AERA has no power, jurisdiction, or authority to review capital expenditure to be incurred or to substitute its own cost estimates for market-discovered prices arrived at through competitive bidding. The Tribunal quoted at length from its earlier judgment in AERA Appeal No. 6 of 2016 dated 16 April 2025, which had held that Section 13(1)(a)(i) of the AERA Act uses the words “the capital expenditure incurred” and that AERA cannot pre-emptively estimate costs or disregard actual costs arrived at through market discovery.

The Tribunal held that once MIAL follows the bidding process under OMDA and SSA and a market-driven price is arrived at through a binding contract with a successful bidder, AERA cannot alter that contract price. Paragraph 1.5.1 of the impugned order, which applied the Normative Approach Order No. 07/2016-17 dated 6 June 2016 to CSMIA, was quashed and set aside. AERA was directed to allow the actual cost incurred by MIAL for the passenger terminal building and associated works.

Cost of Debt: Actual Rates Must Be Allowed

On the cost of debt for the Third Control Period, AERA had capped the rate at 10.30% whereas MIAL's actual cost was 10.98% as submitted in its Multi Year Tariff Proposal. The Tribunal held that this issue had already been decided against AERA in the MIAL SCP & TCP judgment of 6 October 2023, which directed AERA to consider actual cost of debt and conduct a true-up accordingly. The Tribunal also referred to the GHIAL TCP judgment of 14 February 2024 and the Mangaluru Airport judgment of 11 September 2025, all of which had consistently held that capping the cost of debt is uncalled for and unwarranted when debt has been availed from reputed lenders.

For the Fourth Control Period, AERA had fixed the cost of debt at 10.15%. The Tribunal applied the same reasoning and directed AERA to allow the actual cost of debt for the Fourth Control Period as well, with a true-up at the time of the Fifth Control Period tariff determination.

Self-Contained Note and the Rs. 305 Crore Adjustment

One of the four fresh issues concerned AERA's reliance on a Self-Contained Note dated 30 August 2023 from an Authorised Investigation Agency, which had informed AERA that the predecessor of MIAL had allegedly siphoned away Rs. 705 crores. On the basis of this note, AERA reduced the target revenue by adjusting amounts under the heads of depreciation and return on RAB. MIAL argued that this note was an extraneous consideration, that the matter was pending trial with no finality, and that the predecessor's alleged conduct could not be visited upon the present appellant.

AERA contended that a charge-sheet had been filed and there was a prima facie case, justifying the adjustment. The Tribunal's analysis on this issue, along with its findings on bad debts, digitalization cost allocation, and legal expenses, formed part of the substantive reasoning in the judgment.

Digitalization Costs and Legal Expenses

AERA had allowed only 30% of total digitalization costs as aeronautical O&M expenses, relying on the mixed-use nature of the digital platform. MIAL argued that at least 82% of digitalization expenditure was aeronautical, based on activity-wise manpower allocation, and had sought at least 60% aeronautical allocation. On legal expenses, AERA excluded them from O&M on the ground that Schedule-I of the SSA does not include legal expenses and that there is no direct nexus with aeronautical services. MIAL contended that legal expenses were necessary for smooth airport operations and that DIAL had been treated differently in AERA's tariff order dated 28 March 2025.

Binding Force of Earlier TDSAT Judgments

AERA had argued that the earlier TDSAT judgments relied upon by MIAL carried no binding precedential force because each was under challenge before the Supreme Court under Section 31 of the AERA Act. The Tribunal rejected this argument at length. It held that a judgment of a competent court or tribunal is binding from the moment of its pronouncement and that the mere filing of an appeal does not suspend its precedential value. Only a stay or reversal by a superior court can extinguish that effect.

The Tribunal drew on the Supreme Court's ruling in Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association, (1992) 3 SCC 1, which held that even a stay of operation of an order does not obliterate the order's existence in law. It also applied the ratio of the Supreme Court's decision in Cellular Operators Association of India v. TRAI to hold that TDSAT's appellate jurisdiction under Sections 17 and 18 of the AERA Act is of the same amplitude as its jurisdiction under the TRAI Act, conferring full appellate power to examine the legality, propriety, and correctness of AERA's determinations on fact, technical methodology, accounting treatment, financial assumptions, and contractual application.

The Tribunal held that if TDSAT were to treat its jurisdiction as merely supervisory, it would defeat the legislative design, since the appeal to the Supreme Court under Section 31 is confined to substantial questions of law and is not designed to revisit the entire record afresh.

Outcome

AERA Appeal No. 2 of 2025 was allowed. AERA Order No. 01/2025-26 dated 7 May 2025 stands modified to the extent of the issues allowed in the appeal. AERA was directed to give effect to the judgment within three months of receiving a copy. All pending miscellaneous applications connected with the appeal were also disposed of.